As a political risk analyst, you have been asked to prepare a short report detai

Question

As a political risk analyst, you have been asked to prepare a short report detailing the possible consequences to business operations of a multi-national enterprise (MNE) working in the coffee sector in a politically-unstable country in Latin America. Your clients wish to know the possible effects of expropriation, confiscation, or domestication of their business. You should explain what each of these actions might comprise, and suggest potential counter-measures that your client could adopt to pre-empt this occurrence, or ameliorate the situation should action be taken against you.

Explanation / Answer

Political Risk Indices analyse and quantify short and long-term risks to political stability, examining states in comparison to their regional and global peer group. compared with regional and global averages, which could affect your strategy.

Business Environment

Business Environment Risk Indices quantify and compare a country’s operating risks against its regional or global peers.

In-depth Analysis on:

Following issuea are also a threat to coffee business in latin america:-

Men not laws
Governments traditionally have been all about men, not laws. In fact, many times a newly elected president will undertake rewriting the constitution so that it supports his party, political beliefs and so on. (This is happening right now in Ecuador, Venezuela, and Bolivia, to name three). So the constitution is often about the person, not the country. When a new president comes in, a new constitution or constitutional reform is often a part of the new regime.

And let´s not be smug. The U.S. and Great Britain had civil wars on their way to creating viable representative democracies, and we still have plenty of corruption. Still, what is different in Latin America is that the revolutions of 1810-20 that kicked out the Spanish did not result in the creation in each country of a constitutional convention, passage of a bill of rights and creation of a viable institutional framework to support a democracy. Basically, whichever clever and powerful person could pull together enough support to control the capital could to some extent control the country.

Multinational companies support dictators
Democracy is messy, so multinational companies, with the support of Democratic and Republican presidents alike over the last 200 years, have supported dictators who guaranteed stability (often through violent repression of dissenters) and no disruption in business. It´s embarrassing for an American to read about all the assassinations and coups we have supported in the interest of protecting the flow of low-cost natural resources, manufactured goods and agricultural products.

The lack of strong local industries has meant these countries are subject to the fluctuations of international commodity prices and other external forces, creating conditions for economic instability, which translates into social and political instability.
Socialists come to power
Socialist leaders of various stripes have risen to the top recently in Argentina, Brazil, Nicaragua, Bolivia, Venezuela and Ecuador by promising to kick out multinationals and share more of the wealth and the land with the majority. These countries suffered terribly in the 1980s and 1990s when they tried to adopt market-driven economic policies imposed by the International Monetary Fund and World Bank. (These policies are known disparagingly in Latin America as neo-liberalism.) So now these countries are swinging in the other direction, toward state-run economies. The U.S. is worried but shouldn´t be. There is an opportunity to work in a hybrid of the two economic models.


Weak institutions, strong dictators
Today, most countries in Latin America have weak institutions that the public does not respect -- courts, police, congress, executive -- so they trust a system that is like that run by the mafia: you take care of me, I´ll do a favor for you. It´s all about relationships, family connections, friendships, alliances. The law is not trusted, respected or used to resolve disputes. There is even a recognized occupation for people whose job is to facilitate paperwork (gestor in Mexico, tramitedor in Bolivia) by strategic gifts (mordidas en Mexico, coimas in Bolivia) Investors shun a lot of these countries because contracts are hard to enforce (no seguridad jurídica).

Druglords (narcotraficantes) fill the vacuum left by weak institutions. The druglords build schools, playgrounds, hospitals and provide food programs for the poor. In exchange they expect, and get, silence and cooperation. They have destabilized the rule of law in large parts of Chihuahua and other Mexican states.

The rich and the poor
Also you don´t have a big middle class here. When you have a middle-class majority, you have a built-in self-interest in stability. Here there is institutionalized wealth and poverty, which means that you almost always have a very unhappy majority.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.